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Aluminium futures on the Multi-Commodity Exchange (MCX), which was oscillating within ₹196 and ₹204 in the past three months, broke out of the range last week. On Friday, it closed at ₹211.95 and is currently trading at around ₹209.
The breakout of ₹204 has turned the near-term outlook positive. Only a breach of the immediate resistance at ₹215 will turn the medium-term trend bullish. If such a break occurs, aluminium futures might rally to ₹225.
On the other hand, the contract could find support at ₹206. In case this support is breached, the price could fall to ₹200 quickly.
Trade strategy
Since the upside is limited and the risk-reward is unfavourable for fresh longs at the current level of ₹209, we suggest staying out for now.
Buy aluminium futures in case the price declines to ₹206. Place stop-loss at ₹202. When the contract rallies to ₹212 after the buy trade is triggered, tighten the stop-loss to ₹208 from ₹202. Book profits at ₹215.
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